Korea vows policy efforts against herd behavior in market

Screens in Hana Bank's trading room in central Seoul show the Kospi closing at 2,481.03 and the Kosdaq at 802.45 on Friday. [YONHAP]

Korea plans to take measures to stabilize the financial market if there is excessive herd behavior in the wake of the U.S. central bank's annual Jackson Hole meeting, a senior government official said Monday.

First Vice Finance Minister Bang Ki-sun also said the government will closely monitor Korea's currency and bond markets with "extra" caution as the domestic market has moved in tandem with U.S. markets.

U.S. stock markets nosedived Friday after Federal Reserve Chair Jerome Powell reaffirmed a hawkish monetary policy stance during his speech at the Jackson Hole economic symposium last week.

Powell said the U.S. central bank will raise interest rates "for some time" to tame inflation and the move could bring "some pain" to households and businesses with slower growth and job losses.

"As Korea's financial market is deeply coupled with movements in U.S. and other major markets, there is a need for close monitoring and responses," Bang said at a meeting.

"The government will step up policy efforts to stabilize the market to brace for excessive herd behavior in the market," he added.

Tracking tumbles in the U.S. market, Korea's main stock index opened sharply lower. The Kospi sank 59.12 points or 2.38 percent to trade at 2,421.91 as of 9:02 a.m. The local currency was trading at 1,343.60 won against the dollar, down 12.30 won from the previous session.

The Korean currency has sharply fallen against the U.S. dollar in recent months amid the Fed's aggressive monetary tightening.

The local currency fell below the 1,340-won level per dollar for the first time in more than 13 years Tuesday. The won has weakened about 11 percent against the greenback so far this year.

Bond yields, which move inversely to bond prices, also jumped in recent trading amid global rate hike drives.

The finance ministry said last week it will buy back Treasury bonds and take steps to help curb a rise in bond yields, when needed, if the bond market shows jitters.

Yonhap